Australia, NZ dollars seen lower as rates diverge

10 Apr, 2015

SYDNEY: Analysts have again lowered forecasts for the Australian dollar to reflect expectations of falling interest rates, as central banks across the globe ease monetary policy to support sputtering economies and ward off deflation.

A Reuters poll of 50 analysts saw the Aussie edging down to 73 cents on a 12-month horizon, compared to 74 cents in the March poll.

It hit a six-year trough of $0.7534 last week and remains vulnerable on expectations of more easing by the Reserve Bank of Australia (RBA). The central bank cut rates in February to a record low of 2.25 percent and markets are fully priced for a follow-up move by June.

In contrast, US markets are wagering the Federal Reserve will start tightening sometime this year, an event that would likely set a fire under the US dollar.

The median forecast was for the Aussie to be at $0.7600 in one month, $0.7500 in three and $0.7400 in six. As usual, opinions varied widely with forecasts ranging from 65 cents to 84 cents on a one-year horizon.

It was last at $0.7719, having rallied after the Reserve Bank held off cutting rates this week, surprising some who had wagered on a move.

A separate survey of 43 analysts showed little change in forecasts for the New Zealand dollar which was seen at $0.7400 in one month, $0.7300 in three, $0.7170 in six and $0.7000 on a one-year time frame.

Opinions also varied widely with forecasts ranging from 60 cents to 80 cents on a six to 12-month horizon.

The currency was at $0.7580 on Friday, having found support from a run of strong domestic economic news which likely added to the Reserve Bank of New Zealand's reluctance to cut its interest rates.

The central bank has said a period of rate stability was the prudent course, though markets still have around 26 basis points of easing priced in over 12 months.

Copyright Reuters, 2015

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